Buydowns & Points
Free buyer guide for Massachusetts and New Hampshire. No sign-in required.
What does it all mean? Understand the upfront cost, the early payment relief, and the payment you need to plan for.
What is a mortgage point?
One point equals 1% of the loan amount. A $500,000 home with a 20% down payment has a $400,000 loan. One point on that loan is $4,000. It would be $5,000 on a $500,000 loan. [1]
Discount points: a lower rate for the loan
Discount points are an upfront cost for a lower rate. On a fixed-rate loan, that rate lasts while you keep the loan. One point does not automatically lower the rate by one percentage point. The lender prices the reduction. [1]
Temporary buydowns: early payment relief
Money deposited into a buydown account covers part of the scheduled payment during the early years. The mortgage note rate stays the same. A seller may fund this as a negotiated incentive, subject to loan-program rules. [2,3]
Common schedules at a glance
| Plan | Year 1 | Year 2 | Year 3 | Year 4 onward |
|---|---|---|---|---|
| 1-0 | 1 point below | Full rate | Full rate | Full rate |
| 2-1 | 2 points below | 1 point below | Full rate | Full rate |
| 3-2-1 | 3 points below | 2 points below | 1 point below | Full rate |
"Points below" means percentage points below the note rate to calculate the buyer's principal-and-interest payment, not discount points paid. "Full rate" is the note rate. [3]
A 3-2-1 plan steps down each year. It does not give a three-percentage-point reduction for all three years.
What does a temporary buydown cost?
The cost is the total monthly subsidy, based on the loan amount, note rate, term and schedule. A 3-2-1 plan does not automatically cost three points. [2,3]
Who pays, and how do you qualify?
Seller funding is negotiated and subject to contribution limits and lender rules. For a conventional fixed-rate loan sold to Fannie Mae, you qualify at the full note rate. [2]
Is three years always better?
A longer buydown costs more on the same loan. Compare it with a shorter plan, discount points, closing-cost help or a price reduction. Ask for a written comparison.
Plan for the full payment
Include taxes, insurance, mortgage insurance and condo or HOA charges, which may change. Refinancing depends on future rates, eligibility, home value and costs. A refinance is not guaranteed. [2,4]
Five questions for your lender
- What is my full monthly housing cost at the note rate?
- What will I pay each year, and what is the total subsidy cost?
- Which buydown plans and seller credits does my loan allow?
- How do points compare over the time I expect to keep the loan?
- What happens to unused buydown funds if I refinance or sell?
Thinking about buying in MA or NH?
Let's schedule a buyer consultation to talk about your home search, your monthly budget, and financing options to explore with your lender. I'll help you compare homes, structure an offer, and navigate the purchase.
Prefer texting? Text Judy at 978-360-9495.
Judy Moynihan, REALTOR®
Century 21 North East | Licensed in MA & NH
Sources
- CFPB: Discount points and lender credits
- Fannie Mae Selling Guide B2-1.4-04: Temporary interest rate buydowns
- Fannie Mae: Overview of temporary buydowns
- CFPB: Should I refinance?
General education, not a loan offer. Programs and terms vary. Your lender should confirm your figures and written buydown agreement. Updated October 23, 2026.